The outlook for the global economy over the next two years remains highly uncertain, the World Trade Organization (WTO), has said.
This is reflected in the range of GDP estimates from other international organizations, in some cases relying on multiple scenarios, the WTO said in a statement on Tuesday June 23.
“The World Bank, OECD and IMF have all released forecasts showing significant slowdowns in global trade and GDP; all are broadly consistent with the WTO’s forecast for the current year. The World Bank’s recent forecast would see global output decline by 5.2% in 2020, falling between the WTO’s optimistic and pessimistic range. Other international organizations’ GDP forecasts for 2020 are also increasingly negative, even as their trade projections stay roughly in line with the WTO’s optimistic scenario.
“These estimates imply a less negative trade response to declining GDP growth than was observed during the global financial crisis of 2008‑09, the statement further noted.
It added : The responsiveness of trade to changes in income can be measured by the ratio of the growth of merchandise trade volumes to real GDP growth at market exchange rates, also referred to as the income elasticity of trade.
“The implied elasticity under the WTO’s optimistic forecast for 2020 was 5.3 – in line with that seen during the financial crisis.
“However, if world GDP instead contracts by the World Bank’s estimated 5.2% with a trade decline of 13.4%, the elasticity would only be 2.6.(2) Lower elasticity implies trade holds up better for a given fall in income.”